Good ISM data and an okay jobs report
Last week had a lot of very important economic data, earnings, and the FOMC meeting. On Wednesday, we got the advance estimate for second quarter GDP, which came in at 4%. The advance estimates have been revised downward lately, so it will be interesting to see if this number sticks. On Thursday, we had the Employment Cost Index, which upset the bond market. And then Friday, we had the employment situation report, which showed modest payroll growth and no wage inflation.
Commercial REITs will be encouraged by economic strength
Office REITs like Vornado Realty Trust (VNO) focused on pretty much all of the economic data, particularly the jobs report and the ISM data.
Implications for mortgage REITs
Mortgage REITs, like Annaly (or NLY) and American Capital (or AGNC), are driven by interest rates. Rates have been in a tight trading range.
Last week had a lot of data, but not a lot of motion in rates. As a matter of fact, after it was all said and done, the ten-year bond was more or less unchanged on the week.
Implications for homebuilders
Last week, we heard from Standard Pacific Group (SPF). The pattern of low (or negative) unit order growth combined with big increases in average selling prices is continuing.
It certainly appears the builders are happy to keep increasing prices and willing to live with lower unit growth. At some point, that game won’t work anymore. But for now, it appears the next quantum leap in housing—getting back to a semblance of normalcy—will be a 2015 event.